AI Is Already Disrupting Labor, and Recent Grads Could Be a ‘Lost Generation’

“Artificial intelligence is going to replace literally half of all white-collar workers in the U.S.” That’s a direct quote from Ford CEO Jim Farley from earlier this month. And he is not the only executive ringing the alarm.

Perplexity CEO Aravind Srinivas recently told The Verge that he expects AI to be able to replace recruiters and executive assistants in the next six months. The warnings are plenty, and the timeline the executives give is relatively short. But the reality may be even more imminent.

“The disruption of jobs is already underway, it’s expanding rapidly and it will continue to,” according to John McCarthy, associate professor of global labor and work at Cornell University’s School of Industrial and Labor Relations.

Anthropic’s latest AI assistant, released on July 15, pretty much does all the work that a finance intern would do at an average Wall Street firm. Shopify CEO Tobias Lütke told the company’s hiring managers that they have to explain why an AI agent can’t do the job before they can go ahead with hiring new workers, in an internal memo earlier this year. Duolingo CEO Luis von Ahn sent a similar memo to workers this year. 

“We can certainly say we are facing a serious breakdown in early stages of white-collar careers, and that’s really important because that’s where economic security begins and where we really build our foundations. And right now, that foundation is starting to be pulled away,” McCarthy told Gizmodo.

Young graduates could be a “lost generation”

It’s a particularly bad time to be an unemployed 20-something right now.

The New York Fed released a report in April saying that the labor market for recent college graduates between the ages of 22 and 27 had “deteriorated noticeably in the first quarter of 2025,” with an unemployment rate at its highest since the pandemic. And the gap in unemployment rates between recent graduates and all workers is at its widest since 1990.

Some of that has to do with broader market level trends, the end of a post-covid hiring boom, and a softening economy, but AI is still a significant factor. Generative AI is particularly good at basic tasks, one that a recent graduate might be expected to complete as an entry-level worker.

“Evidence for AI’s negative impact on early careers is already strong, and I worry that the current generational squeeze might evolve into a permanent reconfiguration of early career paths,” McCarthy said.

This, in practice, is a tearing up of the social contract for recent graduates: entry level white-collar work is supposed to function as a training route for the rest of your career. With less of those opportunities at hand for recent college graduates, we are likely to see —and according to McCarthy are already seeing— increased reliance on elite internships and networking. That is only bound to widen inequality.

“There is a real fear that I have that an entire cohort, those graduating during the early AI transition, may kind of be a lost generation, unless policy, education and hiring norms adjust,” McCarthy said. “And I’m not tremendously optimistic about those adjustments happening at the scale they need to.”

Is AI a scapegoat?

New York University professor of management and organizations Robert Seamans, however, thinks we are not at the foot of a labor crisis because, despite the hype and the hiring freezes, we are actually seeing “relatively low rates of AI adoption” across the corporate sector. 

According to a recent Fed paper, one of the biggest challenges in scaling AI right now is not the tech itself; it’s getting businesses to actually use it. Most companies outside of tech, finance, and scientific industries have not worked generative AI into their daily operations yet, and even so adoption is far higher within larger firms than small ones, according to the paper.

“It’s much harder to implement AI in a firm than people realize,” Seamans told Gizmodo. “Firms don’t typically have the in-house talent that’s needed to train, operate and oversee whatever AI they implement, and so until you have the personnel in place that have that expertise, it’s going to be really hard to rely heavily on AI.”

Instead, Seamans thinks some of these companies who are freezing hiring or shrinking their headcount in favor of AI are actually using the technology as a scapegoat for the performance of their firm. 

“It’s much harder to blame tariffs or economic uncertainty for reasons why there’s not as much hiring,” Seamans said.

Nevertheless, even Seamans says he can’t help but notice the signs pointing at AI as at least a partial culprit of what’s happening in the labor market. But to better understand AI’s role, we need the input of “a fully funded U.S. statistical agency,” Seamans said, like the U.S. Census Bureau or the Bureau of Labor and Statistics.

“I think it really highlights the need for the federal government to be tracking AI deployments in firms in real time, so that instead of speculating whether AI may or may not be responsible, we can actually do some research using current data,” Seamans said. 

Where do we go from here?

AI is here to stay. And it’s looking likely that AI innovation and proliferation in the corporate world are only bound to accelerate from here. 

That won’t necessarily lead to “wholesale termination” of jobs but rather a restructuring, according to McCarthy. 

“Human work is shifting and it will continue to, it’s really hard to forecast how it will shape out, but I think there will be enduring demand for roles that require judgment, ethics, creativity, and for jobs that require incorporating context,” McCarthy said.

This restructuring is going to put pressure on colleges, and even K12 institutions, to prepare their students accordingly and not just in computer science classes. McCarthy says he is already implementing this himself at Cornell by teaching his students AI-assisted workflows and tools alongside other general skills in classes.

The other half of the coin is policy. 

“These changes are happening very fast and with greater potential to impact jobs at scale than at any point in history, and I think there are urgent needs for multi-stakeholder dialogue across all levels,” McCarthy said, adding that public policy, educational institutions, and the private sector should be in constant conversation with each other over how to address these issues.

For workers looking to adapt, McCarthy says that what matters most is getting fluent in using AI tools, increasing your adaptability to new roles, and being ready to pivot whenever you may need to.

“I don’t say those things lightly. Unfortunately, I don’t think any of these changes will be easy or comfortable,” McCarthy said. “I have a 7-year-old, and I worry very much about what the future of work will look like for him.”